Correction or Not: This Artificial Intelligence (AI) Stock Is Worth Buying for the Long Haul

Yahoo

14-05-2025

Alphabet put AI to good use decades before it was cool.
Ongoing innovation and massive resources should keep this company ahead in the AI race.
Investors who bought in early have seen huge long-term gains, and the stock still looks affordable.
10 stocks we like better than Alphabet ›
I thought of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) as an artificial intelligence (AI) specialist long before I saw it as a business or an investment idea.
The underlying Google organization started its game-changing search engine in the late 1990s. I studied information science and AI at the time (go Noles!), and was fascinated with Google's search engine. Older alternatives like Lycos, WebCrawler, and Alta Vista could also deliver helpful search results but only if you knew how to tweak your queries just right. It was a lot of work to design search strings like (Motley AND Fool AND investing) AND NOT (scam OR speculation), hoping to find the exact thing I'm looking for
The magic of Google's search engine is that it went a step further. The search algorithm has become a meme nowadays as it steers web users in certain directions and content publishers strive to capture interest with various details.
But back then, it was a revelation to see Google's search tool anticipate what the user is really looking for. The top results were even ranked in a sensible way without detailed instructions. These unique qualities were later copied in some way by every serious rival. They are built on deep text analysis -- also known as machine learning or artificial intelligence.
Not much has changed after more than 25 years. Google kept improving its search engine, surrounded it with other AI-based tools such as Google Translate and the Google Maps navigation functions, and made AI easily available to anybody. Long before adopting the Alphabet moniker, Google was an AI expert for the masses.
So I wasn't surprised when the company had a large language model (LLM) ready to go just a few months after OpenAI released its ChatGPT 3 platform. If anything, I can't wait to see what Alphabet still hides behind the AI lab's closed doors today.
Alphabet's Google arm remains unbeatable in the online search and advertising market -- to a large extent because of its longtime AI commitment. The Gemini LLM is also a leading ChatGPT challenger, and is already integrated into the popular Gmail and Google Docs tools. The classic Google Search experience got an AI mode in March 2025, too. The Gemini system is going places.
Google's AI competence is simply not up for discussion. I'm talking about a proven leader here, with an enormous amount of engineering and financial resources to throw behind the next big idea.
Google (and Alphabet) has been very kind to longtime investors. If you invested just $1,000 when Google hit the stock market in August 2004, that investment would be worth more than $63,700 on May 13, 2025.
Still, the stock has never looked overvalued. Even now, about two and a half years into the ChatGPT-powered AI boom, Alphabet's valuation ratios look downright affordable. AI rivals like Microsoft (NASDAQ: MSFT) and Nvidia (NASDAQ: NVDA) can't hold a candle to Alphabet's value-investing appeal:
AI Stock
Market Capitalization
Price to Earnings (P/E)
Price to Sales (P/S)
Price to Free Cash Flow (P/FCF)
Alphabet
$1.95 trillion
17.8
5.4
26.0
Microsoft
$3.33 trillion
34.6
12.3
48.0
Nvidia
$3.19 trillion
44.4
24.4
52.4
Data collected from Finviz.com on May 13, 2025.
Alphabet's stock price could double and still compare favorably to Microsoft and Nvidia's valuation ratios. I'll agree that Nvidia has earned its premium price via unbeatable business growth, but Alphabet's sales and earnings are rising faster than Microsoft's. Is Alphabet's stock undervalued or Microsoft's overpriced? You be the judge.
Let's just say that I only own one of these two AI stocks, and my choice isn't headquartered in Redmond, Washington.
Alphabet has come a long way from the Stanford garage of its youth, and it's still a thrilling growth story. With or without broad market corrections along the way, I'm almost always a buyer of Alphabet's stock. It's only more tempting in times like these, as the stock trades 23% below February's all-time highs.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Correction or Not: This Artificial Intelligence (AI) Stock Is Worth Buying for the Long Haul was originally published by The Motley Fool